Retailing is the process of selling products and services to consumers for their personal or family use. A retailer is the final business in a distribution channel that links manufacturers with consumers. Although a retailer can also be a manufacturer or a wholesaler in the distribution chain, most retailers direct their efforts to satisfying needs of ultimate consumers.
HISTORY OF RETAILING
Retailing had its raw beginnings in early America with peddlers, a word that comes from the Old English ped, which was a pack in which articles to be traded in the streets were stored. One of the earliest records of peddlers in the American colonies is of an itinerant hawker named Richard Graves, who in 1642 shouted his wares from house to house in an attempt to make a deal with whoever would listen to him.
Peddlers traveled throughout America selling their wares, and in the course of this adventure, American peddlers played a part in settling the South and Middle West because of their ability to carry materials to these sparsely populated areas. Although some peddlers had circular routes near home that they serviced each week, most were wanderers, and trips of 1,500 miles (2,414 km) were not uncommon, often with 50-pound (23-kg) loads strapped to their back.
Peddlers sold everything from specialized goods to specialized services. Native Americans in New York, for example, hung carved souvenir plates from their horses and traded them from settlement to settlement. Other specialist peddlers were carpenters, preachers, dentists, artists, and even breeders, who offered farmers the services of stallions for their mares and bulls for their cows. But the true peddler tended to pack his back or wagon with many items, because it was more profitable to carry a large assortment of goods in anticipation of what people might want or need. Somewhere among all these items would be the famous Yankee notions, which were pins and needles, buttons, razors, brooms, books, window glass, and novelties. Most housewives put aside their "pin money" from the sale of eggs and other products in order to buy these notions, but the peddler would often offer credit or barter for furs and other valuable goods with those who did not.
Peddling was a way out of poverty from colonial days onward, and it is surprising how many notable Americans began their careers as peddlers. Like many other frontiersmen in the nineteenth century, Abraham Lincoln's father was a part-time peddler. When he moved his family from Kentucky to Illinois, he took a trunk full of notions to sell from his wagon to help offset the expense of the trip. Inventors John Fitch (1743–1798)—inventor of the steamboat—and Thomas Edison (1847–1931) both began as peddlers.
Countless American fortunes were amassed by men who started their business on the road across America. B. T. Babbitt, America's first soap millionaire, began by peddling his soap in upstate New York, and the company Stanley Tools was founded by a peddler.
Peddlers probably founded the first real American country stores, which are often described as primitive department stores, in remote backwoods areas during the late 1600s. American country stores enjoyed their heyday between 1820 and 1860, at a time when personal income was rising and the population was growing rapidly. Usually located in the middle of town, the country store was the hub of community activity, and it was characterized by its informality, including bare wood shelves, a hodgepodge of goods, and a porch with rocking chairs where the townspeople could sit and socialize. It has been said that the country storekeeper was all things to all men, and he was usually highly respected and self-educated. His store, with the inevitable flour, cracker, and cookie barrels near the counter, carried what was a wonderland of goods to the civilization-starved settlers; and he usually extended credit liberally. For the children, penny candy ranging from licorice whips to all-day suckers were prominently displayed in jars atop the counter.
Country stores were far from fashionable. For more than twenty years after paper bags were invented in 1850, clerks were still wrapping most packages in brown wrapping paper, folded over and tied with a string. Trading in the stores was often conducted by barter, or "country pay" as it was called, with customers exchanging corn, wheat, rye, and flax, or articles of household manufacture such as
blankets and baskets, for goods on the merchant's shelves. Homemade Indian brooms, maple syrup, barrel staves, skeins of wool, dried apples, blackberries and blueberries, churned butter, potash, and charcoal were usually used as cash crops to barter at the country store.
Lincoln clerked in a country store as a youth, and the story of young Abe walking several miles to return a penny to a customer is part of American folklore. As for P. T. Barnum (1810–1891), he ran a general store in Bethel, Connecticut, where he claimed he learned many a trick from country people who cheated him as adeptly as any city slicker could.
Among the founders of great modern-day American department stores who operated and clerked in country stores, Adam Gimbel (1815–1896), J. L. Hudson (1846–1912), Charles A. Stevens, Aaron Montgomery Ward (1844–1913), and Herbert Marcus (1878–1950) should be mentioned. Some of the old country stores became grocery stores, and a few evolved into department stores.
Origins of the Department Store
As far as anyone knows, the first true department store arose in France in the mid-nineteenth century. The best evidence ascribes its beginnings to Bon Marché of Paris. Founded as a small shop in 1838, Bon Marché had begun to assume the proportions of a department store by the early 1850s. Even at that time, Paris had a long history as a retail and fashion center dating back to 1300, and the city was known for large stores, with up to 100 people working in stores called the Lame Devil, the Little Sailor, and the Beautiful Farmer's Wife. Aristide Boucicaut (1810–1877) is credited with starting Bon Marché as well as inventing the retail concept of allowing people to come into the store and browse, with no obligation to buy. He was also the originator of the money-back guarantee, which at the time was a new concept that built up his trade substantially. In addition, he clearly marked all his goods with fixed prices and permitted no haggling between customers and clerks.
Although Bon Marché and native country stores provided American merchants with the inspiration for creating department stores, the great majority of these department stores began as dry-goods stores. Neither Bon Marché nor any of the world's early department stores would have evolved if economic conditions had not been favorable at the time. The American department store is largely a product of the years from 1860 to 1910. More available capital during the Industrial Revolution, low taxes, and cheap labor to build and staff stores contributed to the rise of the department store in America. By the late 1860s or early 1870s, the department store had a firm foothold in America. Although the term department store is not recorded in the language until 1887, the idea of separate departments in stores can be found in print at least forty years earlier.
Beginning of Mail-Order Retailing
It was also during this time that mail-order retailing began. The earliest colonists, with no manufacturers of their own, first used mail orders to obtain supplies from the mother country. George Washington ordered goods from England and France, as did Thomas Jefferson. Benjamin Franklin has been called the originator of the mail-order catalog because in 1744 he issued a list of 600 books he would sell by mail. Ward thought he could eliminate the middleman by selling direct to country people by mail from offices in Chicago. In August 1872, Ward, with capital of $1,600 in savings, founded what was to become Montgomery Ward, the world's first great mail-order business, soon to be challenged by Sears.
TYPES OF RETAILERS
Over time, different types of retailers have emerged and prospered because they have attracted and maintained a significant customer base. A retail institution is a group of retailers that provide a similar retail mix designed to satisfy the needs of a specific segment of customers. The most basic characteristic of a retailer is its retail mix, which include decisions and strategies regarding the type of merchandise sold, the price of the merchandise, the assortment of the merchandise, and the level of customer service.
The traditional general-merchandise retail stores are specialty stores, department stores, and discount stores. Since about 1970, a number of new types of general-merchandise retailers have emerged and are becoming increasingly important to consumers. These include category specialists, home-improvement centers, warehouse clubs, off-price retailers, and catalog showrooms. A traditional specialty store concentrates on a limited number of complementary merchandise categories and provides a high level of service in an area typically smaller than 8,000 square feet (744 sq m).
Department stores are retailers that carry a broad variety and deep assortment, offer considerable customer service, and are organized into separate departments for displaying merchandise. A home-improvement center is a category specialist that combines the traditional hardware store and lumberyard. It focuses on providing material and information that enable do-it-yourselvers to maintain and improve their homes. A warehouse club is a general-merchandise retailer that offers a limited merchandise assortment with little service at low prices to ultimate consumers and small businesses; the stores are large and located in low-rent districts, and the goods usually include food and general merchandise. Off-price retailers offer an inconsistent assortment of brand-name, fashion-oriented soft goods at low prices, in exchange for not using the manufacturer's promotional allowances, return privileges, and delayed-payment options.
A catalog showroom is a retailer whose showroom is adjacent to its warehouse. These retailers typically specialize in hard goods such as housewares, jewelry, sporting goods, garden equipment, and consumer electronics. Catalog showrooms can offer low prices because they minimize the cost of displaying merchandise, provide minimal service, and are located in lower-rent areas rather than regional malls.
A retail chain is a company operating multiple retail units under common ownership and usually has some centralization of decision making in defining and implementing its strategy. Some retail chains are divisions of larger corporations or holding companies. Because of scale economies and an efficient distribution system, the corporate chains can sell at lower prices. Since about 1990 there has been considerable restructuring of corporate retail chains. These restructuring activities include consolidation and focus, with consolidation of existing retail chains leaving fewer large chains and focus referring to the expertise in managing a specific retail format rather than operating as a holding company for a diverse set of retail formats.
Franchising is a contractual agreement between a franchiser and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchiser. Approximately one-third of all U.S. retail sales are made by franchisees. Some of the most-well-known franchises in America are McDonald's, Subway, and Dunkin' Donuts.
The mail-order retailing of the late 1800s has developed into two types of nonstore retailing: (1) general-merchandise and specialty catalog retailers and (2) direct-mail retailers. General-merchandise catalog retailers offer a broader variety of merchandise in catalogs that are periodically mailed to their customers, while specialty catalog retailers focus on specific categories of merchandise. Direct-mail retailers typically mail brochures and pamphlets to sell a specific product or service to customers at a particular time. Direct-mail and catalog retailing are attractive business opportunities because a business can be started with minimal inventory and can use existing mailing lists to tailor its mailings to a targeted market.
Retailing is experiencing international expansion, with many retail organizations opening stores and expanding beyond the borders of the United States. The most commonly targeted countries or regions are Mexico, Europe, China, and Japan. U.S. retailers have strong incentives to expand globally because U.S. markets are saturated in terms of the number of stores, available locations, and competition. Experts believe that some American retailers have a natural advantage when competing globally because of such factors as technology and the emulation of American culture abroad. Like foreign companies entering the United States, however, American companies entering into these countries face specific government regulations, different cultural traditions, and a variety of languages.
Today, the success of small retailers and major retail corporations depends on how much they embrace the retailing concept. The retailing concept is a management orientation that focuses a retailer on determining the needs of its target market and satisfying those needs more effectively and efficiently than its competitors. Three critical environmental factors affect retailing:
- Competition, because each department store, specialty store, and other type of retail outlet is competing against all others for the consumer's dollar
- Consumer demographic and lifestyle trends and the impact they will have on retail strategies
- Needs, wants, and decision-making processes that retail consumers use
Among the list of consumer trends that are greatly affecting retail sales today are the growth of the elderly population, as the baby boomers age; the rapidly growing minority segments of the U.S. population; the importance of shopping convenience, with consumers wanting one-stop shopping; and the rising number of two-income families.
Another response to the changes in consumers' preferences is a form of co-branding in which two retailers share a location. McDonald's has developed partnerships with Wal-Mart and Home Depot, and Starbucks has opened cafe's in more than 100 Barnes & Noble bookstores.
Since its inception in the mid-1990s, online retailing continues to grow. Online sales in 2004 rose 23.8 percent to $141.4 billion, which represented approximately 5 percent of total retail sales. Online sales of cosmetics and fragrances were expected to grow 35 percent, while the sales of over-the-counter personal care were projected to rise 32 percent. Early in the twenty-first century, retailers have attained growth by launching country-specific sites in order to attract the growing number of international consumers.
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Patricia A. Spirou